Elderly person sitting in park with financial documents creating wealth shadows

The Great Income Illusion: Are Older Americans Richer Than We Think?

Beau Callahan in Business & Economy August 2025 • 4 min read.

"New research reveals a significant underreporting of income among older Americans, particularly retirement funds, challenging conventional wisdom about their financial well-being and poverty levels."

Are older Americans struggling, or are they secretly better off than we assume? It’s a question economists have been wrestling with for years, often relying on household surveys to gauge the financial resources available to those in retirement. However, a groundbreaking study from the U.S. Census Bureau suggests that we may be significantly underestimating the actual income of older Americans, which could radically change our understanding of retirement security and poverty.

The traditional method of assessing income relies heavily on surveys like the Current Population Survey Annual Social and Economic Supplement (CPS ASEC). In 2012, this survey indicated that the median household income for individuals aged 65 and over was approximately $33,800, with a poverty rate of 9.1%. But what if those numbers were wrong?

Researchers Adam Bee and Joshua Mitchell dug deeper, linking extensive administrative income records from the Social Security Administration (SSA) and the Internal Revenue Service (IRS) to the same CPS ASEC sample. The results were startling: when administrative records were used instead of survey responses, the median household income jumped to $44,400 – a whopping 30% increase – and the poverty rate dropped to just 6.9%. This discrepancy challenges long-held beliefs about the financial stability of older Americans.

The Retirement Income Black Hole: Uncovering the Missing Millions

Elderly person sitting in park with financial documents creating wealth shadows

The heart of the issue lies in how retirement income is reported, or rather, not reported. The study reveals a systemic underreporting of retirement income, especially from defined benefit pensions and retirement account withdrawals. Imagine a vast pool of resources, largely untaxed and often overlooked, that significantly boosts the financial well-being of older Americans. That’s precisely what Bee and Mitchell uncovered.

What's causing this underreporting? Here's a breakdown of the potential factors:

Survey Design Flaws: Traditional surveys may not effectively capture the complexities of modern retirement income, especially with the shift towards more diverse and less predictable sources.
Memory and Confusion: Older adults may simply forget or misremember income sources, particularly those received irregularly or from multiple accounts.
Complex Financial Products: The increasing variety of retirement plans, including IRAs and 401(k)s, can make it difficult for individuals to accurately report their withdrawals.
Privacy Concerns: Some individuals may be hesitant to disclose their full financial details, leading to underreporting.
Underreporting at the Extensive Margin: A significant number of people simply fail to report receiving any retirement income at all.

It's not just a minor oversight; this underreporting has major implications. The study demonstrated that these large differences between survey and administrative record estimates are present within most demographic subgroups and are not easily explained by survey design features or processes such as imputation.

Time to Rethink Retirement Security?

This eye-opening research from the U.S. Census Bureau compels us to reconsider our assumptions about the financial status of older Americans. The conventional measures have painted a picture that is way off, and so what are the next steps? Further exploration, including using better surveys and administrative data may be the start to bettering the economic future.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.2139/ssrn.3015870, Alternate LINK

Title: Do Older Americans Have More Income Than We Think?

Journal: SSRN Electronic Journal

Publisher: Elsevier BV

Authors: Charles Adam Bee, Joshua Mitchell

Published: 2017-01-01

Everything You Need To Know

Does government survey data accurately capture the financial resources of older Americans?

A recent study by the U.S. Census Bureau reveals that older Americans may have significantly more income than is typically reported in surveys. By linking Current Population Survey Annual Social and Economic Supplement (CPS ASEC) data with administrative income records from the Social Security Administration (SSA) and the Internal Revenue Service (IRS), researchers discovered that median household income for older Americans was underestimated, while poverty rates were overestimated.

What data sources are more reliable for measuring the income of older Americans?

Traditional surveys, like the Current Population Survey Annual Social and Economic Supplement (CPS ASEC), rely on self-reporting, which can be prone to errors. Older adults may forget income sources, be confused by complex financial products such as IRAs and 401(k)s, or be hesitant to fully disclose their financial details. This leads to underreporting of income, particularly from defined benefit pensions and retirement account withdrawals. The U.S. Census Bureau study used administrative income records from the Social Security Administration (SSA) and the Internal Revenue Service (IRS) to get more accurate figures.

What are the broader implications of underreporting retirement income on economic policy and social programs?

The underreporting of retirement income has major implications for how we understand retirement security and poverty rates among older Americans. The U.S. Census Bureau study demonstrated that the discrepancy between survey data and administrative records is significant across most demographic subgroups. The standard measures have painted a picture that is way off, and so future steps include further exploration, including using better surveys and administrative data which may be the start to bettering the economic future.

What are the primary reasons that older Americans underreport their retirement income in surveys?

The U.S. Census Bureau study identified several reasons for the underreporting of retirement income. These include survey design flaws that may not capture the complexities of modern retirement income, memory and confusion among older adults about income sources, the complexity of retirement plans like IRAs and 401(k)s, privacy concerns leading to hesitance in disclosing full financial details, and a failure to report any retirement income at all. These factors contribute to a substantial underestimation of financial well-being.

How did researchers discover that the income of older Americans is significantly underreported?

Researchers Adam Bee and Joshua Mitchell linked extensive administrative income records from the Social Security Administration (SSA) and the Internal Revenue Service (IRS) to the Current Population Survey Annual Social and Economic Supplement (CPS ASEC) sample. This methodology allowed them to compare self-reported income data with actual administrative records, revealing significant discrepancies in reported income and poverty levels among older Americans.